JAMB Economics 1994

A: What to produce, how and for whom

Every economy chooses what to produce, how to produce it and who receives the output. These allocation decisions arise because resources are scarce.

C: Sacrifice made for the satisfaction of a want

Opportunity cost is the next-best alternative sacrificed to satisfy a chosen want. It measures the forgone opportunity rather than merely the money spent.

C: Flow of goods, services and money among economic sectors

Circular flow links real exchanges with corresponding money payments between sectors. It connects production, income and expenditure in the economy.

A: Human wants are insatiable

Human wants are numerous and recurring, while the resources available to satisfy them are limited. People therefore have to choose which wants to satisfy first; choosing one use of a scarce resource means giving up another use.

D: Private individuals, organisations and the government

A mixed economy combines private enterprise with public-sector activity. Private individuals and organisations make production decisions, while government also produces goods or services and influences resource allocation.

B: Providing a sound framework for policy formulation

A census provides information about population size, location and characteristics. Governments use this evidence to plan schools, healthcare, infrastructure and other services. Counting the population does not by itself remove inflation or unemployment.

A: It is desirable to have a large population

With resources and technology held constant, a population below the optimum has fewer people than the number that would maximise output per person. Increasing population towards the optimum can improve the use of those resources; this does not imply unlimited population growth.

A: Zero and decreasing

Marginal product is the slope of the total-product curve, so it is zero at the usual smooth maximum of total product. Average product equals total product divided by the variable input. At that point marginal product is below positive average product, so average product is falling.

C: Variable

The long run is defined as a period in which a firm can vary all its factors of production, including plant size. It is a planning concept rather than a fixed number of months or years; no factor remains fixed by definition.

A: N5

Total revenue is price multiplied by quantity. The four revenue totals are N75, N80, N85 and N90. Each additional unit adds N5, so marginal revenue, the change in total revenue divided by the change in quantity, is N5.

D: Set his price to maximize his profit

Price elasticity indicates how strongly quantity demanded responds to a price change. A producer can use it alongside cost information to evaluate pricing decisions and pursue maximum profit. Elasticity alone does not lower production costs or determine the profit-maximising price.

C: Percentage change in quantity demanded of commodity X divided by percentage change in price of commodity Y

Cross elasticity measures the response of demand for one good to a price change in another good: percentage change in quantity demanded of X divided by percentage change in the price of Y. It is usually positive for substitutes and negative for complements.

A: Pure monopoly

A pure monopolist is the sole supplier in a market protected by barriers to entry. It can choose an output level and charge the corresponding price on the market demand curve. It cannot independently choose any price and any quantity it wishes.

C: Weather variations

Weather variations change rainfall, temperature and growing conditions, which directly affect crop yields and the amount available for sale. This helps explain seasonal and year-to-year fluctuations in agricultural supply. Pests can also affect production, but weather is the broad climatic factor identified here.

D: Subsistence farming

Subsistence production is primarily intended to meet the producer's or household's own consumption needs. The decisive clue is that the food is for family consumption only, rather than principally for sale to a market.

B: Import substitution

Import substitution promotes domestic production of goods that were previously bought from abroad. Its immediate objective is to replace imports with locally produced goods, often through support for domestic industries.

B: Decreasing the quantity of money in circulation

These are contractionary monetary measures in the standard banking model. A higher required reserve ratio restricts deposit expansion, while a higher discount rate makes central-bank borrowing more costly. Together they tend to restrain credit and money growth.

B: Bad money drives out good money

When two forms of money must circulate at the same legal value despite different intrinsic values, people tend to spend the overvalued money and retain, melt or export the undervalued money. In that setting, bad money drives good money out of circulation.

B: Increase in cash reserve ratio of commercial banks and the sales of government securities

Increasing reserve requirements and selling government securities are contractionary monetary instruments. They restrain bank credit or withdraw liquidity, helping to reduce aggregate demand. Changes to taxes and government spending are fiscal measures, while direct price controls are administrative measures.

B: Take more from the income of the rich

Under a progressive tax, the proportion of income paid in tax rises as income rises. Higher-income earners therefore bear a larger percentage burden, not merely a larger cash payment under an otherwise identical flat percentage rate.

D: Fiscal policy

Fiscal policy uses government taxation and expenditure to influence economic activity and resource allocation. Monetary policy instead concerns instruments such as interest rates, money and credit conditions, generally administered by the monetary authority.

C: net income from abroad

Gross national income equals gross domestic product plus net primary income from abroad. Here N17,700 million minus N16,800 million equals N900 million, so net income received from abroad is positive N900 million. This is an income flow, not the stock of investments abroad.

B: Encouragement of savings, investment and equitable distribution of goods and services

Saving can provide resources for productive investment, while investment builds capacity and supports future output. Equitable access to goods and services can broaden improvements in living standards. Population growth or extra consumption alone does not ensure economic development.

D: Promote the free movement of persons, goods and services within the sub-region

ECOWAS pursues regional economic integration. Removing barriers to the movement of people, goods and services is a central part of building a regional market and cooperation among its members; the objective is broader than creating a single specialised institution.

A: Invisible items

Shipping and freight are transport services, rather than physical merchandise. International service receipts and payments are traditionally called invisible trade, so freight charges are invisible items rather than capital transactions or unrequited transfers.

C: Its quota to the Fund

A member's quota is a key basis for measuring its access to IMF financing, with normal access limits commonly expressed as percentages of quota. Actual lending also depends on the facility, financing needs and applicable conditions; quota is not an unconditional promise of a loan.